United Bank of India to suspend bank loan facility

Kolkata headquartered public sector lender United Bank of India (UBI) will soon have the dubious distinction of becoming a bank that doesn’t give loans.

It has suspended all lending activity for an indefinite period, barring a few exceptions such as crop loans, as it’s crippled with 10% bad loans, net losses for two straight quarters and a slump in capital adequacy. The ratio of bad loans to total lending is the worst in the industry.

The bank’s tier 1 capital has fallen below 6%, which is the stipulated regulatory requirement, prompting the lending halt, bank officials said. They said that only agricultural loans, loans against deposits and staff loans that carry very low risk will be given for the time being until further notice.

The lender, already the subject of a Reserve Bank of India (RBI) investigation into dubious lending practices, is expected to issue a formal circular on the loan stoppage soon.